LGC refund to Portsmouth should be larger, union chief says

By Elizabeth Dinan

edinan@seacoastonline.com

December 12, 2012 - 5:14 PM

PORTSMOUTH — A $643,462 refund the city is expecting for overpayments made in 2011 to the Local Government Center, would be two to three times greater if the LGC calculated the refund as ordered by a hearings officer, said David Lang, president of the state firefighters’ union.

Two state officials confirmed, on the condition of anonymity, that refunds for overpayments to the LGC would be larger if the municipal insurer followed the hearings officer’s order. They directed Seacoast Media Group to hearings officer Donald Mitchell’s August order mandating that the LGC refund the lesser of the following two amounts: all money in excess of 15 percent of insurance claims, or all money in excess of a risk-based capital reserve of 3.0 (three times an actuary’s reserve). Instead, the LGC announced it will retain a 3.75 risk-based capital reserve, .75 percent greater than the legal order allows. The difference is estimated to be between $5 million and $10 million.

“One of the most important issues on appeal is how to set a prudent level of reserves for the risk pools to keep on hand to protect the members from unexpected and catastrophic future claims, like a Superstorm Sandy hitting the coast of New Hampshire or an outbreak of Triple E from mosquitoes,” said LGC’s general counsel David Frydman.

Lang countered that a Superstorm Sandy or a Triple E outbreak would have no financial impact on a health insurance risk pool.

“This does not hold water for a normal-thinking person,” Lang said. “The thought of a swarm of Triple E infected mosquitoes stinging a large group of Health Trust covered employees is not reasonable. Stop the rhetoric. Follow the law.”

In the absence of a Supreme Court ruling, Frydman said, “the amount of the 2011 return of surplus (will be) based on the level it believes is a safe reserve, 3.75 RBC.”

“Should the Supreme Court uphold the lower level of reserves,” Frydman said, “then the amount returned to members for 2011 could be increased prior to the time frame for completing the 2011 return.”

Using the LGC’s 3.75 number, Portsmouth expects the following cash refund:

• $192,077 for overpayments made for employee health insurance.

• $38,601 for excess payments for employee dental insurance.

• $84,967 overpaid for property liability insurance.

• $276,546 for school department health insurance.

• $51,271 for school department dental insurance.

Lang said, “Had the LGC followed the hearings officer’s order, I believe the numbers would’ve been substantially higher, possibly reaching three times as much.”

Those numbers do not include $52 million in refunds the hearings officer found is owed to member communities for the year 2010, which the LGC is appealing to the Supreme Court. Wendy Parker, the LGC’s deputy director for risk pool operations, said Tuesday that the 2010 refunds are due by Sept. 1, 2013, “unless the Supreme Court overturns the hearing officer’s order.”

In response to the LGC’s notice of appeal, Attorney General Michael Delaney filed a scathing 33-page objection, stating, “These monies could have been used by towns, cities, counties and school districts to retain or hire needed teachers, firefighters and police officers during a time of economic hardship.”

Meanwhile, the LGC has pending federal lawsuits against four of its own insurance providers that have refused to pay for its $2 million legal defense and the case isn’t scheduled to go to trial until December 2013.

In April, the SchoolCare risk management pool, which also provides health insurance for public employees through municipal employers, entered into an agreement with the state to refund $8.5 million in surplus to its members.

The Primex risk management pool entered into a similar agreement with the state in March, agreeing to return between $16 million and $21 million to municipal members, including Portsmouth. Both cases were settled with the state and without legal complaints being filed.

On Monday, a group of communities, including Durham, that used to buy insurance from the LGC but no longer do so, filed a formal complaint with the BSR objecting to the LGC’s assertion that they aren’t entitled to refunds for overpayments.

Lang brought the LGC financial controversy to the attention of state officials, leading to a hearing, then the officer’s order and mandate for refunds to all members.